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January 15, 2015

Although no one could have predicted the exact date, the graphs showing meteoric oil production increases over the past few years were the handwriting on the wall. The law of supply and demand can't be repealed by wishful thinking.

Prof. Bill Gilmer of the University of Houston has crunched the numbers on some worst-case scenarios for Houston. Assume an average 33% reduction in oil company capital spending this year, followed by 5% growth in 2016. That, figures Gilmer, would result in the loss of 75,000 Houston jobs. This would be an enormous shock considering that Houston has added 100,000 new jobs every year since 2011.

And it’s not just Houston. In North America, Midland, San Antonio, Sweetwater, Oklahoma City, Williston, Pittsburgh, Alberta, Mexico City, and even Bakersfield, Calif. will feel the pain. The layoffs have started, with about 15,000 cuts announced so far from the likes of Shell, BP , Pemex, Halliburton HAL +0.13%, Suncor and more (full list compiled at the end of this piece) and they will only get worse.

The oil and gas business is cyclical, and the cycles are long. We appear to have entered the downside of this particular cycle.

May 22, 2014

Radical environmentalist have wanted to shut down the fossil fuel industry in the U.S. for years. And one incremental approach to their goal is to find some critter living on oil rich land and try to get it declared endangered or at least threatened. The Lesser Prairie Chicken falls in that category.

Well, here's a solution. Sell the little birds to the state of Illinois. Prairie Chickens are endangered in Illinois, so the state has been flying them by plane from Kansas to Illinois. The Illinois Watchdog says this:

“Illinois is the Prairie State and prairie chickens are an endangered species here, so we thought it would be a good idea to bring them back,” said Scott Simpson, site manager for Prairie Ridge State Natural Area in Newton, Ill.

The feds are chipping in $337,000 toward the program and the state will pay $117,000. Some of the cost to state government may be offset by private fundraising done by the Audubon Society, Simpson said.

That puts the total cost of the program at $455,000 for the next three years. ...

So far this year, the state has relocated 50 cocks and 41 hens. That puts the cost of the program at $1,166 per bird.

There you go. If they'll pay the freight, let them have the West Texas prairie chickens. The birds get relocated out of this drought stricken god forsaken region, and the oil industry gets to stay in business. It's win win.

December 05, 2013

A meteoroid is a small solid object traveling through space. One that enters the earth's atmosphere loses its "oid" and becomes a meteor. Once a meteoroid enters the atmosphere the heat produced by the friction will give off a bright glow visible to the naked eye. And most burn up before striking the earth or exiting the atmosphere.

I'm no astronomer, I simply read the definition at this dictionary. But what brings this to the front is the headline in the morning paper:

And that makes one wonder just what a "meteoric rise" is. Oil production has certainly been climbing of late. But the metaphoric meteor is rather ominous. Most likely, the headline writer simply pulled up a newsy cliche without putting much thought into it.

But if she had thought it through, she might have envisioned a flaming meteor streaking toward the earth, visible for an instant, then either crashing into the earth or simply disappearing. Either way, the metaphor isn't very encouraging to people in the oil business.

Meanwhile, take a look a this chart. What does that look like?

It looks less like a meteor than a needle in search of a balloon. Chart source.

In conventional geothermal plants, water and steam heated by hot rocks deep underground drive turbines in a power plant. The water is then pumped back underground to be heated up again.

The new technology would use carbon dioxide instead of water. This approach has several potential advantages. By eliminating the need for water, it increases the prospects for geothermal projects in dry areas. And computer simulations show that CO2 could produce twice the electricity from a given area that water produces, says Martin Saar, a professor of geology and geophysics at the University of Minnesota. Saar is cofounder of Heat Mining, a company that plans to test this technology in a small power plant that it will build next year.

It's all based on computer simulations so far, and we saw how far astray those things led some people about global warming. But it just might work. Read the whole thing to see the pluses and minuses of the project.

October 01, 2013

Operators have been fracking wells for decades, but lately it's all the rage due to the advent of horizontal drilling and fracking's ability to crack open rocks saturated with oil and/or gas that wasn't previously obtainable.

But how steady is the production stream from a newly fracked well? There's the old analogy that pumping a bunch of stuff into a structure is like shaking up a bottle of hot classic Coke. Pop the top and it spews like old faithful. That sudden gush seems endless, but after the initial spurt the stream dwindles to nothing.

This comes to mind after reading a throw-away line from an abstract of Ed Yardeni's US Oil Production Is Gushing (excerpt). (Via blogs.wsj.com.) He says that America is still some distance from energy independence but that innovative entrepreneurs and new and old technology may make it possible. But here's the line:

The Naysayers say it won’t happen because much of the surge in production is attributable to fracking of old oil wells that deplete in a few months after they are tapped for a second time.

Is that true? All wells will deplete over time, and mature fields like those found in west Texas have produced for decades, albeit at a low rate. But if fracking has given them new life and Yardeni's naysayers are correct, the current west Texas oil boom will last only so long.